Fears that dysfunctional GABS could bring businesses to their knees
Minister of Finance Peggy Serame has admitted that paying suppliers late because of the under-performance of the Government Accounting and Budgeting System (GABS) has potential to collapse small businesses.
Serame says the performance of GABS declined since August 2023, making it hard for government to execute financial transactions, especially payment to suppliers of goods and services to government.
“Delays by Government to pay suppliers on time have the potential to cause cash flow problems which could affect SMMEs, and this may ultimately precipitate the collapse of these businesses if not properly managed,” Serame admitted.
The average turnaround time for paying suppliers is 10 working days, however GABS delays have seen suppliers waiting for a month and even more for their payments.
The minister said they have noticed that they have moved from an average of paying in 10 working days to 12 and the situation is unacceptable.
This is why they are busy at work to re-engineer the procurement and payment processes with the view to reduce the standard to five working days.
In the meantime, they have put in place some measures to optimise the system performance by prioritising critical needs by giving priority to Revenue Offices, payroll and pensions.
They have established a call centre which enables the public to air their grievances and concerns regarding outstanding payments.
They also use the system at local authorities to pay outstanding government suppliers’ payments as a temporary measure to clear the backlog.
From the 1st of April to 20th August 2024, all ministries and independent departments had submitted 293 103 invoices valued at over P32 billion to the ministry of finance for payments.
A total of 160 164 invoices, at a value of over P24 billion were paid within 10 working days, while invoices worth P8 billion were paid outside 10 working days.
“The apparent cost impact to the economy is that late payment to suppliers results in dire cash flow constraints that may ultimately collapse some businesses, resulting in huge costs to shareholders and job losses,” Serame said.
Serame attributed some delays and backlogs to officers who do not do their job properly and sit on invoices without processing them when they realise the mess they made.
She said that outstanding invoices stood at around 13 000 when they started but they have managed to attend to the situation and to date, they have about 5 000 invoices to attend to.
While they acknowledge that potential risks of company closure due to cash flow problems associated with late payments cannot be ruled out, latest company data showed that the total number of registered companies has nonetheless increased by 2.4 percent.